In the latest US corporate fraud case, the trial of the controlling clan of cable-TV firm Adelphia Communications began Monday in the Federal District Court, Manhattan.
Adelphia’s founder, John Rigas, and two of his sons, Timothy and Michael, are accused of ransacking the firm’s accounts and lying to investors in what US Attorney James Comey has described as "one of the most elaborate and extensive corporate frauds in United States history" [WAMN: 24-Sep-02].
It is claimed the Rigases looted billions of dollars from Adelphia -- America's number six cable firm -- using the gains to buy stock in their company and, among other things, construct a private golf course. They are accused of hiding over $2bn in debt from investors, backdating fiscal documents and illegitimately hiking profits.
The trio insist they are innocent and plan to base their defence on the company's auditors, directors and lawyers, who they claim approved loans to the family. However, two former Adelphia executives also charged with participation in the fraud have already pleaded guilty [WAMN: 14-Jan-03].
The questioning of potential jurors is expected to last a week. Opening arguments are scheduled for next Monday in a trial expected to last three months.
Meantime, defense lawyers sought to eliminate potential jurors with ties to Wall Street or to any financial institution that took losses as a result of the Adelphia bankruptcy. And each side banished jurors who might have trouble understanding evidence in what Judge Leonard Sand called a "document case".
According to Charles M Elson, corporate governance expert and professor at the University of Delaware, Adelphia's problems began when the firm went public in 1986.
"The problem is, when a family business takes on public capital, does the family continue to treat it as if it were still in their exclusive control," he asked rhetorically. "When you go public, the whole rules of the game shift dramatically. When you take a dollar out of the company, it's not your dollar."
Data sourced from: The Washington Post Online; additional content by WARC staff